CHAPTER 1

INTRODUCTION

1.0 Introduction

Lean Manufacturing Management (LMM) is a management system that

contains only required resources and materials, manufactures only required

quantity of quality products on time that meet customers demands. The idea

behind LMM is Manufacturing Planning and Control (MPC) system of the

materials and information flow which involve both Manufacturing Resources

Planning (MRP II), and Just-in-Time (JIT) techniques. In addition, Total Quality

Management (TQM) is integrated to ensure the quality of the processes and

products of the system. The capabilities of continuously improving the processes

by identifying and eliminating manufacturing wastes are essential for

effectiveness of LMM. The main benefit of effective LMM is high ratio of

quality to cost of the products manufactured which finally contribute to high

profitable organisation.

Lean Manufacturing has evolved from production shop floor to the whole

organisation and from the individual organisation to all organisations in the

supply chain [Hines et. al. (2004)]. The term itself is also extended to the terms

such as Lean Enterprise, Lean Design, Lean Product Development, Lean

Thinking, Lean Consumption, Lean Solution, and Lean Supply Chain [Womack

et. al. (1990), Lamming (1996), Womack and Jones (2003), Womack and Jones

(2005a), Womack and Jones (2005b), Baines et. al. (2006)]. In this study,

1
Collaborative Lean Manufacturing Management (CLMM) is the term used for

this enhanced LMM that covers all areas within and across the organisation in

the supply and value chain.

1.1 Automotive Industry in Malaysia

Automotive industry in Malaysia began in 1960s with the openings of

several car assembly factories in Selangor with the first car, Volvo 144 rolled off

the line in 1967 [Volvo Malaysia (2005)]. The incorporation of PROTON

(Acronym in Malaysian Language for Perusahaan Otomobil Nasional or

National Automobile Enterprise) on 7 May 1983 and the introduction of Proton

Saga model in 1985 proved that Malaysian government is committed to involve

seriously in car manufacturing and heavy industry. Now, after more than 20

years, there are four national-status car companies, i.e. PROTON, PERODUA

(Perusahaan Otomobil Kedua or Second Automobile Enterprise), INOKOM

(Industri Otomotif Komersial or Commercial Automotive Industry) and NAZA

(Naza Automotive Manufacturing). In addition to this, there are a number of

foreign companies that assemble imported vehicles such as Ford, BMW,

Mercedes-Benz, Volvo, Toyota, Honda, and Nissan.

Automotive industry is considered as one of highly profitable sector of

the Malaysias economy. Since its establishment in 1985, PROTON has proved

to be a success project to the Malaysian government where it once controlled

more than 60% of the car market in Malaysia [Ahmad (2003b)]. With this good

achievement, the second national car company, PERODUA was incorporated in

1995, which focusing on the manufacturing of small and compact cars. It is also

a successful project when PERODUA cars dominate the small car segment

2
market. The success of both companies is however contributed by the protection

by the government, which introduces and imposes various taxes to the imported

cars [Ahmad (2003a)].

In spite of this, and in the light of global business liberalisation, Common

Effective Preferential Tariff (CEPT) of ASEAN (Association of South-East

Asian Nations) Free Trade Area (AFTA) is introduced. Malaysia is committed

to reducing import duties for motor vehicles to 20 percent effective from January

2005 and subsequently to maximum of five percent from January 2008. In order

to enhance competitiveness of domestic automotive industry in meeting the

challenges of AFTA market opening, when the car sector is phased-in into the

CEPT scheme, this pre-emptive review of the car import duty structure has been

undertaken [MITI (2003)]. The government needs to evaluate the future

direction of national car industry that includes strategic partnership, pricing

competitiveness, product quality and reliability, marketing (for local and export)

and cost reduction (in production and distribution).

With the implementation of AFTA, many foreign carmakers entered the

Malaysian market, including from Korea, India and China. For example,

Hyundai from Korea made the most significant gain in market share by

managing 3.3% of the total industry volume in 2005 although it only entered the

Malaysian automotive scene in 2004 [Kamiso (2005)]. Market of national cars

experienced a dip, for example PROTONs local market share fell to 29.7% in

2007 from 65% in 2000. This phenomenon had already been predicted eight

years before when former Director of PROTON, Yoshimi Fumio said [after

Sulong (2000)]:

3
 When the ASEAN Free Trade Area (AFTA) provisions come into

effect in 2005, the PROTON market share could fall to only 30%...

To stay competitive, PROTON has put efforts to improve the quality of

cars and reduce the cost. The development of its Campro engine for Proton

Gen-2, which reduces production cost of 1015 % and the quality certification by

world-class German Standardisation Board, TUV for Proton Savvy is among of

the steps taken [Anonymous (2003)]. For PERODUA, to be more competitive in

the future, the company management set it to undergo a major operational

revamp by localisation programme and streamline their business activities, from

manufacturing to sales. PERODUA is facing a very challenging period, having

now to compete with more carmakers in the below 1,000cc category, where

previously it was one of only a few players in the segment [Kamiso (2004)].

1.2 Problem Statement

In the light of globalisation and current competitive business

environment, management should not only focus on the Lean Manufacturing

within organisations, but also the Lean Manufacturing between the organisations

in the supply chain. All members in the LMM chain from suppliers to customers

must work together towards common objectives in order to make the Lean

Manufacturing work effectively in the collaborative environment.

Although LMM is a system that improves competitiveness of the

organisations, there are still problems related to it. The problems include

suppliers perception of being exploited, coping with product variability, and

high pressure to shop floor workers [Cusumano (1994), Hines et. al. (2004)].

4
 With the realisation that the Lean Manufacturing concept is not fully

understood and adopted due to its business dynamic in nature, a frame work of

CLMM is needed to investigate the gap between the practice and ideal system.

Furthermore, people factors such as culture, openness, trust, willingness to

change and commitment also play significant roles in the CLMM development.

1.3 Objectives

The problems stated in the previous section have motivated this research.

The main objective of this research is to investigate the recent state of Lean

Manufacturing philosophy practised in automotive industry and its supply chain,

particularly in Malaysia. This research is also designed to capture the

knowledge, understanding and culture within this industry community and to

recommend the necessary actions which can be taken by the industry in

developing and improving the CLMM. This main objective has led to the

following systematically listed research objectives:

a) Objective 1: To design a conceptual model of CLMM: The model can be

used to analyse the CLMM implementation in the automotive industry

and its supply chain. The model integrates factors that represent

particular issues such as internal and external lean chain, organisation

competitive priorities and organisation resources that support the

development of CLMM.

b) Objective 2: To convert the conceptual model into a hybrid Knowledge-

Based (KB), Gauging Absences of Pre-Requisites (GAP), and Analytic

Hierarchy Process (AHP) system: The conceptual model developed in the

first objective then is converted into Knowledge-Based CLMM

5
 (KBCLMM) structure. The KBCLMM structure is needed to enable the

development of system using an expert system shell, and embed the GAP

and AHP techniques in the KB system.

c) Objective 3: To verify and validate the KBCLMM by the use of published

case studies and actual data from organisations within automotive

industry in Malaysia: The developed KBCLMM then needs to be verified

and validated to ensure the system works as planned, and has the

capability in identifying and suggesting the areas that need improvement

to support the development of CLMM.

d) Objective 4: To use the verification and validation results to improve the

KB system: The KBCLMM System is then improved by using the results

from the verification and validation process. Information retrieved from

the organisations data and knowledge gained from the interview with the

experts can be used to improve the validity, reliability and consistency of

the KBCLMM System.

e) Objective 5: To suggest future work based on the improved KB system:

From the improved KB system, new research is recommended for future

work.

1.4 Methodology

The methodology of this research is a combination of literature review,

development of research model, detailed development of the strategic and

operational of the KBCLMM System, and the verification and validation process.

The methodology activities flow is shown in Figure 1.1.

6
 Detailed
Development of
development of
conceptual model
Literature KBCLMM
of KBCLMM
Review Strategic Level

Yes
Strategic?
Detailed
No development of
KBCLMM
Operational Level
Yes
Refinement
Verification and
Validation
No

Finish

Figure 1.1: Research Methodology Activities Flow

1.4.1 Literature Review

An extensive review of literature relevant to the scope of the research has

been conducted, which contributes in identifying the key variables for

developing the research model and the design of questions and explanations

needed in the KB system. From the literature review process, the concepts,

scope and principles that influence the development of CLMM are formulated.

The first stage of the literature review relates to the Lean Manufacturing

Management and its relation to the development of CLMM, while in the second

stage, the review focuses on the tool (KB methodology) that supports the CLMM

development. Both these aspects are reviewed in Chapter 2 and Chapter 3.

1.4.2 Model Development

The KBCLMM Model is the most detailed part in the research

development process and consists of two stages. Planning Stage (Stage 1)

7
consists of Organisation Environment, Business Collaborative and Lean

Manufacturing components. Design Stage (Stage 2) consists of Organisation

CLMM Capability and Organisation CLMM Alignment components. Each of

these components consists of sub-components and activities that represent

particular issues in the CLMM development.

Since the CLMM is supported by the KB methodology, it is known as the

Knowledge-Based Collaborative Lean Manufacturing Management (KBCLMM)

System. From the conceptual model, all components are transformed into the

KBCLMM System structure, which is embedded with the GAP and AHP

techniques, and thus, key areas of potential improvement in the CLMM are

identified for each activity along with the identification of both qualitative and

quantitative aspects for CLMM implementation. The conceptual model of

KBCLMM is described in Chapter 4.

1.4.3 Data Collection, Verification, Validation and Analysis

In order to address the real situation of CLMM operation, the research

verification, validation and analysis are conducted for an automotive

manufacturers Lean Manufacturing Chain in Malaysia. Published case studies

are also used to verify and validate several modules for their validity and

reliability.

1.5 Significance of the Study

This research explores the use of a hybrid Knowledge-Based/GAP/AHP

system to plan, design, and implement a CLMM in automotive and automotive-

related manufacturers. The system developed will be able to be used by the

policy makers in making new strategies and introducing new business policies.

8
1.6 Outline of the Thesis

This thesis consists of eight chapters. The introduction to the research, its

background, problem statements, research objectives, methodology, and

significance of the research are included in this chapter, Chapter 1.

Chapter 2 presents the literature review in the area of Collaborative Lean

Manufacturing Management (CLMM) which includes Just-in-Time (JIT),

Manufacturing Resources Planning (MRP II), and Total Quality Management

(TQM), and the integration of these systems.

A review on Knowledge-Based System (KBS) literature and its

application in Production and Operations Management (POM) are presented in

Chapter 3. Literature of Analytic Hierarchy Process (AHP) and Gauging

Absences of Pre-requisites (GAP) Analysis, which are embedded in the

KBCLMM System, is also reviewed.

Chapter 4 presents the conceptual model and basic framework of CLMM,

including brief description of every component in the planning, design, and

implementation stages, followed by the description of the KBCLMM System

structure.

Chapter 5 describes in detail the Planning Stage (Stage 1) of the

KBCLMM System, which includes Organisation Environment Perspective

(Level 0), Collaborative Business Perspective (Level 1), and Lean

Manufacturing Perspective (Level 2).

Chapter 6 presents the Design Stage (Stage 2) of the KBCLMM System,

which includes detailed description of Organisation CLMM Capability

9
Competitive Priorities Perspective (Level 3), Organisation CLMM Capability

Resources Perspective (Level 4), and Organisation CLMM Alignment Process

Perspective (Level 5).

Chapter 7 describes the details of the verification and validation of the

KBCLMM System. It covers the verification and validation through the

published case studies and the industrial case studies.

In the final Chapter 8, overall conclusion of this research, achievement of

the research objectives, and recommendation for the future research are

presented.

10